Peru | BCRP hikes MPR and points to significant challenges to activity looking forward

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 4.50% to 5.00% in May. The Bank continued the normalization of monetary policy but pointed to lower external headwinds and pessimism in expectations.

Key points

• Key points:
• The policy rate increased by 50 basis points for the ninth time in a row.
• The Bank insisted that the higher inflation observed in April is a result of further significant rises in the international price of food inputs and fuels.
• The monetary authority maintained its inflation forecast and expects it to return to the target range (2% +/- 1%) between the second and third quarter of next year.
• Inflation expectations increased from 4.4% to 4.6% in April.
• We expect the Central Bank to continue hiking, taking the reference rate to 5.50% in the following months.

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